By JOHN COOK, SEATTLE POST-INTELLIGENCER REPORTER

Published 10:00 pm, Tuesday, January 3, 2006

Large drug makers have been courting Trubion Pharmaceuticals for months, intrigued by the Seattle biotechnology startup's novel approach for treating rheumatoid arthritis, cancer and other diseases.

Tuesday, one of the country's pharmaceutical giants officially stepped up to the plate.

Wyeth Pharmaceuticals, the 44,000-employee division of Madison, N.J.-based Wyeth, said it will work directly with Trubion to develop a new class of drugs that easily penetrate tumors or diseased tissue.

The deal, which consists of an initial $40 million cash payment to Trubion, has the potential to exceed more than $800 million if all milestones are achieved.

Wyeth also reserved the right to buy shares of Trubion if it elects to conduct an initial public offering, something that Trubion Chief Executive Peter Thompson said the company would consider this year.

It's a blockbuster deal, and one that pleased Trubion executives and venture capitalists.

"It is a good way to start the new year in Seattle, compared to last year," said Arch Venture Partners' Robert Nelsen, a Trubion board member. "I would call it the reblossoming of Seattle biotech."

In many respects, Trubion is still an early-stage company. Founded in 2002 by former executives of Chiron, Immunex and Xcyte Therapies, Trubion employs just 40 people at its downtown Seattle headquarters. It has only one drug candidate in clinical trials: a treatment for rheumatoid arthritis dubbed TRU-015.

As part of the agreement with Wyeth, Trubion will have the option to co-promote TRU-015 and some other drugs in the United States.

But Wyeth, with 37 manufacturing facilities in 17 countries, will retain worldwide rights. Wyeth and Trubion also will work together to develop additional drugs.

Not all of Trubion's drug candidates will be turned over to Wyeth, with Thompson saying that the company will retain certain technologies.

He declined to say what specific diseases the company plans to target on its own or through its partnership with Wyeth.

He also declined to elaborate on upcoming clinical trial programs. The privately held company plans to increase its work force significantly this year, though Thompson did not provide specific figures.

Trubion considered partnerships with other pharmaceutical companies, but chose Wyeth because of the historical ties between employees at the two companies.

Several executives and researchers from the two companies worked together to develop Enbrel, the rheumatoid arthritis drug developed in the Seattle laboratories of Immunex and now marketed by Amgen and Wyeth.

"This was kind of bringing a very successful alliance back together," said Thompson of the latest multimillion-dollar deal. He doesn't view Trubion's rheumatoid arthritis candidate as a competitor to Enbrel, adding that there is potential for the two drugs to work together.

The science behind Trubion is unique, investors and company officials said. Using a drug assembly system known as small modular immunopharmaceutical technology, Trubion rapidly pieces together parts of proteins in order to create new drug candidates. Thompson compares the process to Tinker Toys.

"It is like having libraries of parts in front of you, and you can put them together in different ways to create drugs that have defined and customized properties," he said.

Because of the design, Thompson said, there "is no inherent limitation" in terms of what diseases the company can target.

"We have rather an embarrassment of riches," he said. Focusing the company on the most attractive and lucrative drug candidates will be a challenge going forward, he said.

But he said that is "always an issue for pharmaceutical companies."

The flexibility of the Trubion drug assembly system is one of the reasons the company attracted interest from large pharmaceutical companies, Nelsen said.

"When you find something strategic for a pharmaceutical company, then they will open up the checkbook ... ," Nelsen said. "And they must think it is going to be a really big drug to put out those kind of resources, and really big in pharmaceutical terms means a $1 billion or more product."

Nelsen said the deal is one of the largest biotechnology partnerships he has encountered in recent years. By comparison, a major alliance announced in 2004 between Seattle-based ZymoGenetics and Geneva-based Serono involved $80.5 million in cash and the possibility of more than $600 million in milestone payments.